The Securities and Exchange Commission has accused a subsidiary of GlaxoSmithKline and the subsidiary’s former chief executive of defrauding employees and other shareholders by buying back the company’s private stock at severely undervalued prices.
In a lawsuit filed in federal court in Florida, the SEC accused Stiefel Laboratories Inc. and former chairman and Chief Executive Charles Stiefel of withholding information from shareholders in order to acquire their shares at bargain prices.
Among several accusations, the SEC said Stiefel falsely told shareholders that the company would remain family-owned when he was actually negotiating the sale of the company to GlaxoSmithKline.
Amid the acquisition talks from December 2008 to April 2009, Stiefel’s company bought more than $13 million worth of stock from shareholders. When Stiefel announced it was being acquired by GlaxoSmithKline on April 20, 2009, those shares gained more than 300% in value, the SEC said.
“Stiefel Labs and Charles Stiefel profited at the expense of their employee shareholders who lost more than $110 million by selling their stock based on the misleading valuations they were provided,” said Eric I. Bustillo, director of the SEC’s Miami office. “Private companies and their officers must understand that they are not immune from the federal securities laws, which protect all shareholders regardless of whether they bought stock in the open market or earned shares through a company’s stock plan.”
Based in Coral Gables, Fla., Stiefel was the world’s largest private manufacturer of dermatology products before its acquisition by GlaxoSmithKline, the SEC said.
-- Stuart Pfeifer
Photo: GlaxoSmithKline factory in Puerto Rico Credit: Brennan Linsley / Associated Press